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Monday, December 17, 2018

Sold Gafisa

Amidst the market carnage, I have sold one of my longest held securities, Gafisa. Following a successful proxy contest by a dissident shareholder, new management has taken a lot of steps to cut costs. As such, the stock has done well. Well enough that it's time I said goodbye.

The return over the last five years is far from amazing. But considering the market collapses seen in Brazil not long ago, I'll take the small gain and run. Though I tend to avoid emerging market companies, I bought this one anyway because management talked a good game and of course the valuation was extremely enticing. It is less so now following years of writedowns and losses.

I thought it would be a simple investment. It turned into a complex journey involving asset sales, spin-offs, regulatory changes, political risks, rights offerings and other events that induced a bunch of brain damage.

The final straw for me was a cost cut that would see English-language financial reporting no longer be a regulatory requirement. It was hard enough for me to figure out what was going on when Gafisa did report to the SEC. I feel like it's virtually impossible for me to adequately keep up without this requirement, even if the company maintains it plans to (but has no obligation to) still report in English.